5 benefits of the new Tax Reform Bills for SMEs in Nigeria

Nigerian Government with all stakeholders are currently discussing different Tax Reform Bills sent to the National Assembly of the Nation to better structured Tax systems in the country

What does this mean for Small Businesses in Nigeria (SMEs)? What are the benefits of the new Tax Reform Bills for SMEs in Nigeria?

Here are the 5 benefits of the new Tax Reform Bills for SMEs in Nigeria when passed to law

No more multiple taxes

The bills proposed a single Tax collector instead of many Local, State and Federal agencies collecting Taxes. According to a report by Moniepoint, Local Government levies are one of the difficult levies or taxes confronting small businesses in Nigeria

According to that report, it is the most difficult to comply with by small medium enterprises

With the new bills passed to law, the Federal Inland Revenue Service will be changed to Nigerian Revenue Service (NRS) as the sole collector of Taxes and other related levies in Nigeria

VAT Reliefs for Small Businesses

This is a good news for small businesses in Nigeria if the bills are passed to law. The Presidential Committee on Fiscal Policy and Tax Reforms in the bills sent to the National Assembly proposed VAT Reliefs for Small Businesses

VAT known as Value Added Tax is the Tax paid by customers of businesses on products purchased or services provided to them by the businesses

For example, a company contacted your business to design a logo for them. In your invoice, after the service charge, you will add a 7.5% of that service charge to the invoice to be paid by the customer

The VAT will then be remitted to the Government

Many SMEs have been complaining how it is hard to comply with the VAT policies. Apart from that, it affects patronage from customers as many customers decide to opt out due to the VAT added

With the new Bills, there will be a relief of VAT collection by small businesses

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Reduction in Companies Income Tax

The bills further proposed reduction in the Companies Income Tax from 30% to 25%. This CIT will only affect companies with Annual Revenues of N50,000,000

According to a report by Moniepoint Small Business Statistics in Nigeria, In SMEDAN and NBS findings, 64.5 % of micro-enterprises in Nigeria have a monthly turnover of less than N50,000, while 29.4 % have an average income of N50,000 to N300,000, and the remaining have a monthly turnover of N600,000 to N900,000.

With this statistics, many SMEs and micro businesses in Nigeria will be exempted from the Companies Income Tax

Remote Workers will not be Taxed

To encourage remote jobs more inflow to the country, the new proposed bills will exempt remote workers from Personal Income Tax (PIT).

PIT will on be charged if the services are physically carried out within Nigeria

This will help small businesses to utilize the expertise of experts remotely to scale and grow their businesses.

This will also improve the employment inflows to the country as many freelancer platforms and techies will want to take this advantage of no or low PIT

Digitization of the Tax Systems

Ofcourse, it is not that SMEs will not pay any Tax but the little that will be paid by small enterprises, the bills ensure they are well collected using digital systems to avoid multiple taxes

Reducing the bottleneck of physical fillings, SMEs can simply sit behind their computers or smartphones to file their Taxes stress free

This will also reduce the cost of transportation to and fro the Tax office for fillings